Thursday, January 31, 2008

Recycling workers

"The three-plus-three cap is only meant for unskilled workers. We want to make sure that we recycle labour, in and out. For example, we want to give as many people as possible a chance to come in and work in the country and not restrict it to the same workforce year-in, year out." ...The workers would leave the UAE with experience which will benefit them in their home country as well, he added.

"In any case we're still in the process of fine-tuning the length of the cap and we also want to get a GCC-wide approval to enable workers to travel within the region."

Other benefits of the policy: Undercutting unskilled-worker activism; meeting world standards to extend rights to immigrants based on length-of-stay.

Burkle-Clinton-Dubai

And, now, add to the list, Clinton-Giustra-Kazakhstan. The New York Times stays on top of Bill Clinton's unsavory business connections. The latest:

Upon landing on the first stop of a three-country philanthropic tour, the two men were whisked off to share a sumptuous midnight banquet with Kazakhstan’s president, Nursultan A. Nazarbayev, whose 19-year stranglehold on the country has all but quashed political dissent.

Mr. Nazarbayev walked away from the table with a propaganda coup, after Mr. Clinton expressed enthusiastic support for the Kazakh leader’s bid to head an international organization that monitors elections and supports democracy. Mr. Clinton’s public declaration undercut both American foreign policy and sharp criticism of Kazakhstan’s poor human rights record by, among others, Mr. Clinton’s wife, Senator Hillary Rodham Clinton of New York.

Within two days, corporate records show that Mr. Giustra also came up a winner when his company signed preliminary agreements giving it the right to buy into three uranium projects controlled by Kazakhstan’s state-owned uranium agency, Kazatomprom.

The monster deal stunned the mining industry, turning an unknown shell company into one of the world’s largest uranium producers in a transaction ultimately worth tens of millions of dollars to Mr. Giustra, analysts said.

Just months after the Kazakh pact was finalized, Mr. Clinton’s charitable foundation received its own windfall: a $31.3 million donation from Mr. Giustra that had remained a secret until he acknowledged it last month. The gift, combined with Mr. Giustra’s more recent and public pledge to give the William J. Clinton Foundation an additional $100 million.......Nearly a year earlier, Mr. Clinton had advised Dubai on how to handle the political furor after one of that nation’s companies attempted to take over several American ports. Mrs. Clinton was among those on Capitol Hill who raised the national security concerns that helped kill the deal.

Former President Clinton stands to reap around $20 million -- and will sever a politically sensitive partnership tie to Dubai -- by ending his high-profile business relationship with the investment firm of billionaire friend Ron Burkle.

Indian-looking white girls

The presence of Caucasian models in Indian advertisements has grown in the past three years, industry analysts say. The trend reflects deep cultural preferences for fair skin in this predominantly brown-skinned nation of more than 1 billion people. But analysts say the fondness for "fair" is also fueled by a globalized economy that has drawn ever more models from Europe to cities such as Mumbai, India's cultural capital.

"Indians have a longing for that pure, beautiful white skin. It is too deep-rooted in our psyche," said Enakshi Chakraborty, who heads Eskimo India, a modeling agency that brings East European models here. "Advertisers for international as well as Indian brands call me and say, 'We are looking for a gori [Hindi for white] model with dark hair.' Some ask, 'Do you have white girls who are Indian-looking?' They want white girls who suit the Indian palate."..."The Indian mind-set prefers light skin. My pictures are routinely Photoshopped to make me look a bit lighter -- a lot lighter, actually," Riya Ray, 23, a dark-skinned Indian model, said with a laugh. "But when I work in Britain and France, my color is praised as exotic. It is a two-way trend: Indian models are going abroad, and foreign models are coming here."

White models, who usually visit India on three-month work visas, earn $500 to $1,500 for a single shoot, a rate that is relatively low, largely because the models tend to come from developing European countries and are new to the international scene.

Tuesday, January 29, 2008

When can welfare benefits and immigration be separated?

"This region will not remain Arab-Islamic in the presence of millions of Asians here. I do not exaggerate when I say that we will soon see a Gulf minister or Member of Parliament from the Indian subcontinent," [Bahrain's Labour minister Majeed Al Alawi] said in an interview published on Sunday in Asharq Al Aswat newspaper.

Al Alawi lashed out at the lazy character of Gulf nationals that has made them almost fully dependent on imported labour even for the simplest tasks and blasted the Gulf business community for their uncontrollable greed, claiming that they were driven "only by financial interests and without any regard for the formidable damage caused by foreign workers."

The minister, a leading opposition figure who was given the labour portfolio in 2002, has now failed twice to have the GCC leaders endorse a proposal for a residency cap to limit the growing influence of the expatriate communities.

I would not describe Gulf nationals as having a "lazy character." I would say that they respond to incentives, and that in many countries in the Gulf nationals benefit from the welfare state that the oil revenues of those countries can support.

By contrast, the ex pats in the GCC have a reputation for working hard. But that is because their income is tied to their productivity; they do not receive the benefits of the welfare state. Arguably - because the GCC is so dependent on foreign labor - it has the most open immigration policy in the world. The economist Milton Friedman argued that open immigration was incompatible with a welfare state. Here's what Lant Pritchett had to say about that in an interview with Reason:

Reason: Milton Friedman has pointed out that open borders are incompatible with the welfare state.

Pritchett: I would have thought Milton Friedman would have taken that as an argument for open borders.

The free mobility of labor is incompatible with the welfare state if every person who is physically present in a location to perform an economic service automatically comes into the same set of welfare benefits as a local. That needn’t be the case.

This is what liberal democracies find hard. But it’s not impossible. You have to confront the injustice of the world and say this person is better off even without the welfare benefits, and this process is good for the world.

Reason: You then create a division between first- and second-class citizens. Isn’t that worrisome?

Pritchett: The world now is divided into first-class citizens of the world and fifth-class citizens of the world. The idea that we wouldn’t help a peasant trying to eke out a living on a side of a mountain in Nepal by letting him work in the United States, just because we have to, if he comes to the United States, endow him with all the rights of U.S. citizens—I think that moral calculus is backward.

So the first answer is: Milton Friedman is wrong. It’s not incompatible with a welfare state; it’s incompatible with a welfare state that doesn’t differentiate between people within its territory. Singapore manages to maintain an enormously high level of benefits for its citizens with massive mobility. Kuwait has one of the highest immigrant populations in the world, and you can’t ask for a more cradle-to-grave welfare state than what Kuwait gives its citizens. So it’s obviously possible to maintain whatever level of welfare state you want and have whatever level of labor mobility you want, as long as you’re willing to separate the issues.

In the GCC it has been politically feasible to admit immigrants and deny them welfare benefits. Would it be politically feasible in the U.S. to separate immigration from access to welfare benefits? Not all Americans would agree, but I suspect the majority believe that if someone is admitted to the country then they should have access to most if not all of the public benefits that citizens enjoy. At the same time Americans do not support open immigration. Thus, most Americans - although they may not recognize it - leave most would-be immigrants worse off than if they could accept second-class residency.

Thursday, January 24, 2008

Investing in people

Dear Readers: What are your thoughts about why UAE employers invest so little in their employees? Or is it just a myth that they don't?

Here's what Avishesha Bhojani, CEO of the newly branded BPG – formerly Bates Pan Gulf Advertising – had to say in a recent interview with Emirates Business 24/7:

Talking about talents, there has been a lot of talk about it but with no specific details. What is the problem?The issue of talent is the biggest challenge. The biggest gap is the shortage of Arabic-speaking talent in public relations and communications. No one is interested in training and professionally trained people are rare.

At the end of the day, if there is a high demand for professional performance, delivery and satisfaction, why is finding talented people such an issue?Let me put it bluntly. Historically, the advertising training for Arabs used to happen in Beirut. Today Lebanon is in trouble. In Dubai, no one trains. Dubai wants ready-made people. If you want good people of Indian origin there is enough training happening in India. If you want good people of British origin, there is enough training in Britain. But for native Arabs, that is not the case. Dubai needs to invest in training talented Arabs with potential. And if that is happening at all, it is not at the pace that can satisfy the demand and growth acceleration in the UAE. Why should people get trained in Lebanon, Jordan or Egypt if they will work in Dubai or elsewhere in the UAE?

So what should be done about training Arab talent?Investment in advertising and public relations training is the key. Last year I hired six fresh native Arab graduates from the journalism and marketing programme at the American University of Sharjah and I trained them. Even though at the end of the year two of them left, I still have four and it is still worth it. Even if I had ended up with two at the end, it would have been passable.

Market expecting Fed to cut rate substantially, again

Because the UAE pegs the dirham to a fixed amount in terms of the dollar the government banking authorities here must follow the Federal funds rate downward (in the present case), otherwise there would be a rush of conversion of dollars into dirhams to get the higher return; the peg would become unsustainable. There have been doubts expressed about whether the peg is sustainable in any event. Here is the latest example:

Although the UAE Central Bank's insist that it would neither opt for a revaluation of dirham nor move away from the US dollar peg, currency experts and economists say the revaluation is impending. They say the dirham is currently 30 to 35 per cent undervalued against the US currency.

Economists said to ward off further inflationary trends, dirham has to be strengthened against other currencies by switching to a basket of currencies as Kuwait and Syria had done. For this the UAE has to undertake a series of currency arraignments to ensure the true value of its currency.

Tuesday, January 22, 2008

Clinton to sever sensitive relationship in Dubai

Former President Clinton stands to reap around $20 million -- and will sever a politically sensitive partnership tie to Dubai -- by ending his high-profile business relationship with the investment firm of billionaire friend Ron Burkle.

Mr. Clinton is negotiating to end his relationship with Mr. Burkle's Yucaipa Cos. as part of a broader effort to protect the presidential campaign of his wife, Sen. Hillary Clinton, from potential conflicts of interest. Details of Mr. Clinton's involvement in Yucaipa and his efforts to unwind it come from documents and interviews with people familiar with the matter....Mr. Clinton is also one of three owners of the global fund's general partner. The others are Mr. Burkle, who is the managing member, and an entity connected to the ruler of Dubai, Sheikh Mohammed bin Rashid al-Maktoum.

Severing the tie to Dubai, a U.S. ally, will remove a potentially tricky problem for Mrs. Clinton. Questions raised about the activities of sovereign wealth funds -- giant pools of money controlled by foreign governments -- have become a campaign issue, as the funds have made a spate of multibillion-dollar investments in such corporate giants as Citigroup Inc. and Merrill Lynch & Co. In a recent interview with The Wall Street Journal, Mrs. Clinton said such purchases are "a source of concern," partly because the foreign funds "lack transparency" and could be used by foreign governments as "instruments of foreign policy."...Mr. Clinton's duties and activities as a Yucaipa adviser have never been completely clear to outsiders....Since leaving the White House, Mr. Clinton has had various contacts with Dubai. For example, Sheik Mohammed last year pledged financial support to a Clinton charitable initiative, and the former president's foundation has a scholarship program at the American University in Dubai in cooperation with the emirate's ruler.

See also this related post from last month at Huffington. My earlier coverage of the Clinton-Dubai-Burkle links is here.

Treating women as grownups

Women in Saudi Arabia can now stay in a hotel or a furnished apartment without a male guardian according to a decision by the Ministry of Trade, the local newspapers reported on Monday.

The Al Watan daily said the ministry issued a circular to the hotels asking them to accept women in their rooms even if they were alone provided that all their information were immediately sent to a police station in the area.

The royal family has previously baulked at granting women driving permits, claiming the step did not have full public support. The driving ban dates back to the establishment of the state in 1932, although recently the government line has weakened.

“There has been a decision to move on this by the Royal Court because it is recognised that if girls have been in schools since the 1960s, they have a capability to function behind the wheel when they grow up,” a government official said. “We will make an announcement soon.”...The move is designed to forestall protests for greater freedom by women, which have recently included campaigners driving cars through the kingdom in defiance of a threat of detention and loss of livelihoods.

Sunday, January 20, 2008

The garment industry in the UAE

Shakheel Alam, Marketing Manager of Sara Textiles at Umm Al Quwain Free Zone, said: “Many of the garment units which operated in the UAE have converted their premises to other businesses such as bulk construction materials like timber and steel.”...New labour welfare measures have increased salary and benefits costs. Alam added: “While a worker in Bangladesh earns $50 per month one in the UAE costs $500 – including food, accommodation, travel and other items. Chinese and Indian companies have a huge advantage in terms of volume and labour costs. We export 70 to 80 per cent of our production. Many units which moved their operations to Jordan, Egypt, Kenya or Bangladesh save 30 per cent duty in the US and EU markets.”...A report on the UAE’s garment industry by the Emirates Industrial Bank said the decline in the number of factories began in the run-up to the abolition of the international quota system.

The fall began in 1998 and by 2004 the number of garment units in UAE had come down to 151, employing about 27,000 people. In 2006 the number of operational firms was around 100. The report said: “Several firms have relocated while maintaining offices in UAE. Garment production is easy to relocate without major transportation and/or installation costs. The choice for relocation destinations are Jordan and sub-Saharan Africa, areas which are receiving preferential treatment from the US in the form of duty-free access to the American market.”

The quota scheme, which nurtured the industry by guaranteeing small nations access to the US and Europe, was abolished to provide consumers in the West with cheap imported products. The system had enabled the UAE industry to flourish despite lacking raw materials such as textile yarn and fabrics, cheap labour and a large domestic market to support manufacturers....Hundreds of garment units in the UAE were started by investors from India, Pakistan and southeast Asia. Now most have shifted their operations to other countries to take advantage of free trade agreements with the United States.

Thursday, January 17, 2008

In praise of McDonalds

Adrian E. Tschoegl, Global Economy Journal (2007)

Critics have excoriated the US fast-food industry in general, and McDonald's most particularly, both per se and as a symbol of the United States. However, examining McDonald's internationalization and development abroad suggests that McDonald's and the others of its ilk are sources of development for mid-range countries. McDonald's brings training in management, encourages entrepreneurship directly through franchises and indirectly through demonstration effects, creates backward linkages that develop local suppliers, fosters exports by their suppliers, and has positive external effects on productivity and standards of service, cleanliness, and quality in the host economies.

From my casual observation in the UAE, McDonalds and other franchises, are doing exactly that. Thanks to The EclectEcon for the link.

Wednesday, January 16, 2008

A warm place to die

Here's some economic news that might fuel continued growth in demand for living in the UAE:

Heat waves may receive more publicity, but it turns out that cold periods — days with an average temperature below 30 degrees —have more significant and longer-lasting effects on human mortality. More people die in cold periods than in homicides.

Extreme cold brings cardiovascular stress as human bodies struggle to adjust to the temperature; many of the deaths in these periods come through heart attacks. Heat waves tend to kill people who were already weakened and would have died soon anyway; cold periods bring additional people to the verge of death.

When retired people move to a warmer state, their life expectancy rises dramatically. In fact, 8 to 15 percent of the increase in American life expectancy over the last 30 years comes from people moving to warmer climates, according to research done by two economics professors, Olivier Deschenes at the University of California, Santa Barbara, and Enrico Moretti, at the University of California, Berkeley.

Saturday, January 12, 2008

Efficient queuing, Emirates style

How can we reduce the amount of time waiting in line? The Undercover Economist has the answer:

Imagine a bank queue in which one customer arrives per minute, and one customer per minute is dealt with by staff. All it takes is a cashier on a cigarette break, or a sudden rush of customers, and you could have 10 people in the queue. At that point, each person has to queue for 10 minutes, even though people are leaving as quickly as they are arriving. Somehow the queue must be disposed of.

The solution is elegant and unexpected: new arrivals should go directly to the front, to be served immediately after the current customer. Queues would then be very short, because once a customer was pushed back a couple of places he or she would give up and go home.

This is the system that I encountered for the first time when I moved to the Emirates. Who knew it was the most efficient? Yet another case where unbridled pursuit of selfish interest produces the socially optimal outcome.

Friday, January 04, 2008

The Abu Dhabi translation project

As part of efforts to transform the emirate into the cultural lodestone of the Middle East, the Abu Dhabi Authority for Culture and Heritage, or Adach, has chosen 100 books to be translated into Arabic. Among them are Alan Greenspan's memoir, ``The Age of Turbulence,'' John Maynard Keynes's ``The General Theory of Employment, Interest and Money'' and Milton Friedman's ``Capitalism and Freedom.'' The goal is to translate 100 titles every year.

Adach has formed a nonprofit organization called Kalima (Arabic for ``word'') to undertake the translations and expand Arabic-language publishing in the United Arab Emirates.

About 10,000 books have been translated into Arabic in the past millennium, according to a 2003 study by the United Nations Development Program. The demand has been small, partly owing to the historical tendency to focus most reading on religious texts and classical poetry. Some 300 new translations appear each year, so Kalima's further 100 titles represents a substantial addition.

Kalima will buy rights, pay translators and enlist established Arabic-language publishers in the Persian Gulf region and North Africa to print and distribute the books.

Sheikh Mohammad uses mystery shoppers

Sheikh Mohammad's "spies," known as "mystery shoppers," fan out across government offices to observe and grade the efficiency, competence and attentiveness of local officials. Those who receive poor marks are quietly rebuked, while those who impress move into an informal Dubai fast-track, receiving increasingly more challenging tasks, greater responsibility and more scrutiny. If they survive those tests they gradually enter the rarefied air of the Dubai high-flyer executives, the dozen or so movers and shakers who are transforming the Gulf city-state into a major regional and global trade, tourism, transport, technology and financial services hub.

This survival of the fittest produces a top-notch government elite, not one stocked with cronies and family members of the ruler - and might just be the key to Dubai's remarkable rise. While Western capitals search for an Arab "democratic model," Dubai is providing an Arab "meritocratic model" that underpins its successful growth and development....While much of the Middle East is burdened by a steady brain drain, Dubai has managed to cut against the prevailing grain by both nurturing local talent and drawing in leading regional money managers, traders, bankers and consultants in what is amounting to a brain regain. An ambitious young man in Karachi, Cairo, Tehran, Jeddah or New Delhi no longer instinctively sets his sights on Europe or the US. The Dubai School of Government (DSG), for example, has managed to attract three leading Saudi women PhD professors away from Europe and the US along with an array of top thinkers from the Arab world and a smattering of World Bank executives. Whether or not Dubai might offer a model matters less in this instance than what it is actually doing: keeping Arab talent in the Arab world....Afshin Molavi, a journalist and fellow at the New America Foundation in Washington, was a Dubai-based correspondent with Reuters. This commentary first appeared at bitterlemons-international.org, an online newsletter.